Protecting Workers’ Rights in China: Q&A with Aaron Halegua

Labor unrest is on the rise in China, fueled by unpaid wages and mass layoffs amid a sputtering economy. Part of the problem, experts say, is the government’s relatively weak enforcement of labor rights and inadequate access to legal services for aggrieved workers.

In an interview, Mr. Halegua discussed the state of labor relations in China. Edited excerpts below:

WSJ: Your research found that Chinese workers are often unsuccessful in using litigation to resolve labor disputes, and many workers still resort to strikes and protests. What implications could this have for industrial relations as China’s economy continues to slow?

Mr. Halegua: China’s courts are ill equipped to deal with the rise in bankruptcies, plant closures, mass layoffs, or the restructuring of state-owned enterprises. Political solutions to these disputes are often necessary.

The government prioritizes maintaining order and stability, using whatever mix of cash, coercion and other measures is necessary to quell worker unrest. Authorities are quick to intervene in strikes or protests and attempt to mediate a settlement. Where a private employer lacks the money, the government often uses its own funds to pay the workers and resolve the dispute.

Thus far, China has been able to manage labor unrest through this ad hoc strategy. However, this approach is costly for the government and becomes harder to sustain as the number of strikes rises and the government’s own tax revenue falls.

WSJ: In lieu of independent labor unions, China prefers to use mediation and litigation to manage labor disputes. Does the increase in such cases over the past decade reflect improving access to legal recourse, or worsening conditions for Chinese workers?

Mr. Halegua: No single factor can explain this growth. Part of the story is workers’ ever-growing awareness of their rights, thanks to the ubiquity of mobile phones and the government’s own outreach efforts. The virtual elimination of litigation-filing fees also had a big impact.

Another key factor is the economy. Tough times generally produce more disputes--over wage arrears, unpaid social insurance, or severance. Fearing retaliation, many workers won’t bring long-standing claims to court until they are laid off. So these claims also increase when the economy sours.

WSJ: Your research showed that while the government has improved access to legal aid, coverage often remains inadequate and of variable quality. What can be done to improve workers’ access to legal representation?

Mr. Halegua: The government has called for increased monitoring of legal-aid work, which could help improve quality. Another thing to consider is investing more in full-time, professional legal-aid attorneys, as opposed to the current model of paying private law firms a small stipend to do a few cases. Some localities have already started to move in this direction.

Workers’ access to representation would also increase if private lawyers had the right economic incentives to take these cases. For instance, it doesn’t make financial sense for a lawyer to represent a single worker with a small claim, but representing 1,000 such workers together in a single case might. Reforms that facilitate such collective or class-action litigation would be a good step forward.

Another idea is to institute a scheme that requires an employer to pay the legal fees of a worker who prevails in litigation. Shenzhen has experimented with such a “fee-shifting” mechanism, but the award cannot exceed the legal fee initially paid by the worker and is capped at 5,000 yuan [about $750]. Therefore, this scheme provides no additional incentive for a lawyer to represent a worker who can’t pay a substantial fee upfront.

In the U.S., the size of the fee is a function of how much time the lawyer spends on the case, and there is no upper limit. This also deters employers from drawing out the litigation process with frivolous appeals, a common practice in China and one that discourages lawyers from representing workers.

WSJ: Some experts say that China’s labor-arbitration bodies lack adequate resources and are staffed by low-paid civil servants with basic legal training. How significant is this problem?

Mr. Halegua: In some parts of China, there are still concerns over the capacity of the arbitrators. I don’t think this necessarily favors either employees or employers. It might, however, make arbitrators more committed to resolving cases through mediation, obviating the need for a written decision.

The fact that arbitrators are essentially civil servants subject to political influence, as opposed to independent jurists, may also cut both ways. When the government is intent on favoring local businesses, this may hurt workers. But when a large group of disgruntled, unpaid workers arrive at labor arbitration, the government focus on maintaining stability often translates into a quick decision in their favor.

WSJ: China has arrested numerous human-rights lawyers. How has this affected efforts to improve labor-rights enforcement?

Mr. Halegua: In addition to the economic reasons, many lawyers are discouraged from taking labor cases because they may be politically sensitive, particularly collective cases or disputes in which the workers may strike or protest.

Some local bar associations issued regulations requiring lawyers who take such cases to report them to the authorities and warning the lawyers against provoking the workers to protest or petition the government. These measures further dissuade attorneys from representing workers in labor cases.

WSJ: Your report recommends a number of ways to improve legal protections for Chinese workers. Which proposals do you consider more achievable, given the current economic and political climate?

Mr. Halegua: China already has legal provisions prohibiting retaliation against union officers, whistleblowers and individuals who complain to the labor department. The report proposes extending similar protections to workers who complain directly to their employer or bring a lawsuit to challenge an illegal practice.

There is also a proposal to impose civil liability on individual employers, as opposed to just the corporate entity, for labor-rights violations. This could help deter violations and alleviate some problems workers face when trying to enforce arbitration or court awards. This is good policy even in a tough economic climate, because it doesn’t place additional burdens upon employers who comply with the law.